States looking at getting discoms/SEBs to compensate consumers for power outages must fix the right penalty amount

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Published: April 19, 2018 4:38:37 AM

Delhi, over the last couple of summers, has seen an average peak power demand of over 6,000 MW—and this is predicted to touch 7,000 MW soon.

discom, SEB, consumer, power outageThe Delhi government has proposed a policy that will make it mandatory for discoms to compensate for unscheduled power outage. (Reuters)

The Delhi government has proposed a policy that will make it mandatory for discoms to compensate for unscheduled power outage. As per a report in The Times of India, unscheduled power outages will attract Rs 50 per hour penalties for the first two hours and Rs 100 per hour penalty after that. The amount the consumer is billed over the billing period will be adjusted for the compensation due to her during that period. Delhi, over the last couple of summers, has seen an average peak power demand of over 6,000 MW—and this is predicted to touch 7,000 MW soon.

For meeting such massive power demands, discoms need to procure enough power from generation companies. While the two Delhi discoms have long-term power purchase agreements (PPAs) with government-owned generation companies, state electricity boards (SEBs) in most states have shied away from long-term PPAs—only four states, in the four years to November 2017, had invited bids for long-term PPAs. Even then, the agreements signed made for a fraction of the total bid capacity of the utilities in these states.

Given falling solar power rates and the rise in the price at which thermal power from conventional sources is procured—the price of one unit of power sold in the spot market is 1.5 times of what it was a year ago—SEBs and discoms are not keen on long-term PPAs. While mid-term and short-term power purchases are being preferred, in peak-demand season, SEBs and private discoms tend to offset lower-than-demand purchases with long scheduled and unscheduled power outages.

High rates of power procurement from generating companies is likely to exacerbate this. In a scenario where discom/SEB losses from power purchase at high costs are higher than fines imposed for outages, the utilities are likely to prefer paying fines over bearing the losses. Hence, Delhi as well as other states that are looking to implement a compensation policy for power outages need to make sure that penalties pinch the utilities.

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